Monday, April 09, 2012

Tankers in English Bay & Canada's Confidence

The Oilholic headed to downtown Vancouver from the suburbs this afternoon, up on Burrard Street, turning right on Davie Street, down Jervis Street straight through to Sunset Beach in order to get a look in at the English Bay which is quite a sight. Standing bang in the middle of the beach, to your left would be Granville Island, the Burrard Bridge overlooking it and Granville Bridge reaching out to it.

To your right would be two more beaches and Stanley Park on the Vancouver Downtown Peninsula and looking out to the horizon you’ll see pristine waters of the Bay littered with tankers (see image above on the left, click to enlarge). The view is a vindication of Western Canada’s growing crude credentials and its clout in the world of oil & gas exports. Yours truly and other onlookers would often spot the odd oil or LNG tanker on the horizon making its way to or from Vancouver Harbour and docking bays on the inlet towards Port Moody. However, this afternoon the Oilholic counted 12 tankers - the most yours truly has ever counted on five previous visits to the Bay!

There is a new found confidence in the Canadian energy business and a palpable shift in the balance of economic prowess from a manufacturing-led East Coast/Eastern dominated macroeconomic dynamic of the 1950s to a natural resources-led West Coast/Western dominated economy since 2005 or thereabouts. Furthermore, an ever mobile financial services sector with its hubs in Montreal and Toronto now looks increasingly Westwards. Law firms and advisory firms are increasing their presence in Western Canada by expanding practices and a network of partners in Calgary and Vancouver.

Calgary now has more corporate headquarters than Montreal. Of the top 20 most profitable Canadian companies by exchange filings in 2010, eight were natural resources companies with a Western Canadian slant (viz. Suncor, Barrick, Imperial Oil, PCS, Teck, CNR, Goldcorp and EnCana).

A recently spurned merger between natural resources and banking sector(s) dominated stock exchanges of London (LSE) and Toronto (TSX) would have been ideal. But much to the dismay of the Oilholic, the Canadians involved wanted to go it alone and whether you agree or not. In more ways than one LSE and TSX are rivals, especially when it comes to attracting mining companies.

Switching tack to big shots in Ottawa – well to begin with Prime Minister Stephen Harper is an Alberta man. Bank of Canada governor Mark Carney, Chief Justice Beverley McLachlin and the inimitable Rt. Hon. Joe Oliver – the country’s Natural Resources Minister and the most vocal among his G7 peers with an identical ministerial portfolio – are all ‘Western’ Canadians.

Having visited Canada on an annual basis since 2001, the Oilholic has seen the transformation of Canadian politics and the country’s economy first hand and it has been extraordinary in a positive sense. Harper’s “ocean of oil soaked sand” in Northern Alberta has more of the crude stuff than any other crude exporting country bar Saudi Arabia. Let’s not forget the Saudis’ reserves position has been verified by Aramco, Canada’s has been subjected to scrutiny by half world’s independent verifiers of different political leanings and persuasions.

The total value Canada’s natural resources according to various estimates at 2009 prices comes in at US$1.1 trillion to US$1.6 trillion, with the bituminous bit and shale alone accounting for at least 45% per cent of that depending on which financial analyst or economist you speak to.

“Canada’s biggest advantage as an oil exporter in the eyes of the world is that it’s no Saudi Arabia. Furthermore, in a business full of unsavoury characters, dealing with Canadians makes for a welcome change,” quips one patriotic analyst on condition of anonymity.

In the oil business there are no moral absolutes and no linear path to the Promised ‘Crude’ Land. Canada will have its fair share of challenges related to extracting, refining and marketing the oil. The will to do so is certainly there and so are the buyers. The Oilholic’s timber trade analogy has won him quite a few beers from Canadians and pragmatic macro analysts who loved it. There is an unassailable truth here – American dithering and often unjust punitive action against Canadian timber exports in the 1990s lead a Liberal party-governed Canada to look Eastwards to Japan and China.

Fast forward to 2011-2012 and history is repeating itself with President Obama’s dithering over Keystone XL (although TransCanada’s reputation in relation to leaks has not helped either). Akin to the 1990s, there are other buyers in town for the Canadian crude stuff, with India joining the tussle for Canadian attention along with Japan, South Korea and China.

When a Liberal-led Canadian federal government looked elsewhere in the 1990s to market and sell its dominant natural resource at the time, if the US government thinks a present-day Conservative government with a parliamentary majority and a forceful character like Stephen Harper at the helm won’t do likewise (and sooner) when it comes to oil, then they are kidding themselves more than anyone else.

The presence of Korean, Indian and Chinese NOCs can be felt alongside top 20 IOCs in Calgary. Not a single oil major worth its weight in crude oil has chosen to ignore the oil sands, just as onlookers at Sunset Beach can’t ignore tankers on the English Bay horizon. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo: Oil & LNG tankers on the English Bay horizon, British Columbia, Canada © Gaurav Sharma 2012.

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